NaroIQ builds the fund market infrastructure of the future
Cologne-based FinTech NaroIQ, which specialises in digital fund infrastructure, has received more than 6.5 million dollars (5.85 million euros) in a seed round. VC investor Magnetic led the round, followed by Redstone, a European fintech VC. Existing venture investors such as General Catalyst increased their investment. NaroIQ will use the fresh capital to expand its modular fund infrastructure. This enables companies to launch and manage ETF and fund products digitally and cost-efficiently.
The platform is in place
Co-founder and CEO Chris Püllen told Börsen-Zeitung that the platform is in a 2.0 version and that the first products will go live in the second half of the year. „It takes a lot of lead time for a partner to ramp up their product, as regulatory authorisations have to be obtained for each ETF or fund. A larger number of ETFs connected via our infrastructure should then be available in 2026," he said.
With our solution, we want to contribute to the development of an independent European alternative to the US-dominated ETF landscape.
The founder sees NaroIQ as a door opener for more competition in the ETF and fund market, which is lagging behind in terms of digitalisation, and suffers from oligopolistic structures. „With our solution, we want to contribute to the development of an independent European alternative to the US-dominated ETF landscape. Our modular interfaces also enable smaller fund providers and capital management companies to enter the ETF market.“
ETFs will replace traditional funds
His forecast: „We are at the beginning of a unique change. ETFs will replace funds in the retail market over the next ten years and margins will fall significantly. Without a technological solution, only the large fund providers that can benefit from economies of scale will survive. This would lead to an alarming concentration of power and assets in the market.“ This puts the fintech right at the centre of the discussion about European sovereignty, as for example envisaged by the financial sector in payment transactions.
The structural weakness of the ETF market
The fund market has developed its very own value chains, ranging from the fund initiator to the capital management company, the fund administrator and the custodian. This is a fragmented structure that is calling out for tech solutions with APIs as a connecting element – and is led in sales by the large US players. „The European ETF market has a structural weakness that we can address with NaroIQ. It is one of the largest ETF markets in the world, but is dominated by a small number of providers and primarily by US-based fund administrators," says Püllen. "The five largest ETF managers account for three-quarters of assets under management, while US-based companies manage two-thirds of assets, and administer four-fifths of assets under management.“
The situation is therefore clear: the EU financial industry needs a high-performance fund infrastructure that is „made in Europe“ and also enables smaller fund initiators and capital management companies to enter the ETF market. As an as-a-service platform, NaroIQ helps to manage the inherent complexity of ETFs by making every link in the value chain up to the market maker of the exchange-traded products digitally connectable – without the need to send Excel files and faxes, as is sometimes the case.
The ETF is the black swan for the fund industry. In the USA, ETFs already account for more than half of fund inflows.
Income mix is changing
The change in the income mix is accelerating. „The ETF is the black swan for the fund industry,“ says Püllen. In the US, ETFs already account for most fund inflows today. And in 2024 more than half of ETF inflows were in active products. With the loss of share of old fund products, distribution platforms are also losing portfolio commissions – so it is important that providers also focus intensively on their own ETFs.
„And this is where NaroIQ can help to set up a standardised product that can also be operated as a plug and play on existing structures", he says. In addition to providers already active in the fund industry, this could also be of interest to neobanks and neobrokers.
NaroIQ will now invest the fresh capital specifically in technical development and further licensing. The fintech raised a total of 2.8 million euros in a pre-seed round in March 2024. The start-up wants to make a big splash with its investment in fund launch and management. The company was founded by Chris Püllen and Nils Krauthausen in 2022.
